Delivering the benefits of affordable, clean energy in a low-carbon economy…

By Jason Woods, founding partner, In Perpetuum Partners

In March 2018, BEIS published a Call for Evidence to seek views on how industry, government and consumers could work together to phase out the installation of high carbon fossil fuels from rural homes and businesses off the gas grid during the 2020s. The rationale was firmly rooted in delivering the benefits of affordable, clean energy in a low-carbon economy for all sectors of the UK economy, in line with the industrial strategy, while meeting national and international commitments to tackle climate change.

This challenge in relation to decarbonising heat in buildings is reflected in the Buildings Mission announced by the prime minister on 21st May 2018 as part of the Clean Growth Grand Challenge. It aims to at least halve the energy use of all new buildings by 2030, including those off the gas grid, and highlights the ambition to shift to ‘clean heating’ in new build.

OFTEC has engaged In Perpetuum Partners to help respond to government thinking for the off-gas heat network. In Perpetuum is the newly created entity to deliver a bio energy cluster investment portfolio around the bio power, heat, fuels and chemicals markets globally. All products and projects deliver measurable sustainable benefits, meaning they have a positive and provable local and/or global effect on society and the environment. In Perpetuum Partners founders have over 50 years of combined experience in this bio economy market sector covering:

• Bio mass / fuels and chemical markets
• New team / market development
• Project evaluation & delivery
• Sustainability systems
• Price / value discovery and trading
• Government and public affairs

In Perpetuum has applied its full seven filter methodology. This methodology covers feedstocks, sustainability, markets, supply chains, technology, economics and policy, this was completed and delivered to OFTEC during Q2 2019. These assessments have been used within a scenario mapping exercise based on existing and understood future energy scenarios (FES). The outputs of the mapping have been assessed for their strengths, weaknesses, opportunities and threats. In Perpetuum have also assessed relative risks associated with various policy options in relation to key stakeholders.

Off-gas heat network

Through this work, In Perpetuum have found an established industry for supply of equipment and fuels into the off-gas heat network. There are high levels of competition between suppliers of equipment and fuels. The fuel supply industry is well placed to adopt bioliquids as large parts of the asset infrastructure has already found means of buying, storing and blending bioliquids for use in transport. The equipment manufacturers report readiness for use of bioliquids, though the precise nature of the readiness with regards to broad and deep field trials is yet to be understood. 30% inclusion of biodiesel type fuels is believed to be very low risk and potentially 50% inclusion too.

Fossil kerosene and biodiesel fuels trade internationally in mature markets. Prices are publicly available. The fossil kerosene market has strong links to the aviation kerosene market. The biodiesel market links to surface transport.

After full analysis of all the technical heating options available and once you have understood the fabric improvement costs and impact, the CAPEX, OPEX and the total CO2 emissions per heating option, you can rank the alternative heating options by the metric that measures both decarbonisation and cost impact to the end consumer – the carbon saving cost (£/t) shown below:

As you can see from the accompanying charts, the bio options give best decarbonisation impact for £’s spent. When you also assess the carbon saving ability of each of the heating options, you can clearly see that the B100 not only gives the end consumer/UK treasury the lowest cost of reducing carbon for the off-gas heating network, but also provides the highest carbon reducing percentage of all heating options available today and in the mid to long-term.

The electric options will start to compete on carbon saving percentages as the national grid becomes fully renewable over time, but will still have barriers on cost and availability as more sectors use electricity as their decarbonisation method (e.g. electric vehicles).

Next steps for the industry is to:

• Develop a “no regrets” engagement strategy for advocacy to begin to advise and inform policy.
• Engage with whole supply chain to organise and carry out industry wide field trials to address all outstanding questions pre-legislation being written.
• Alongside field trials, set up academic links to run academic trials, during the same field trials timeline, to run simulations on all future scenarios, technologies and potential feedstock/blend stocks.
• Engage with supply chain to choose scenarios that are right for the industry and develop models and documentation to consult with government and key stakeholders.
• Assess impact of each final scenario in terms of impact on economic status of the industry with regards to jobs, growth and investment.
• Consider with industry partners what must be done to achieve chosen scenarios – eg BS2869 specification amendments.
• Create policy, communication and lobbying strategy for industry and whole supply chain.